Managing the Business

Managing Risk & Challenges

In common with all businesses the Group faces risks which may affect its performance. The Board recognises that the management of risk is required to enable the business objective in creating stakeholder value.

The Board and the Operational Management teams regularly monitor and develop a range of financial and non-financial performance indicators to allow them to measure performance against expected targets – these can be analysed under the various categories and the following represents a selection of these indicators:

Organisational & Operational

Personnel

The Group's employees are its key asset as their skills and commitment provide the solid foundation that is important in delivering our future plans and long term success.

Training forms part of an individual personal development plan and, with a clear HR strategy in place we will be rolling out new initiatives and programmes to support both the Group's business plans and the personal goals of all our staff.

Whilst we have an "emergency plan" in place to cover short term issues, TR is currently putting in place a full "Succession Planning Module" which will provide detailed plans in the event of, for example, loss of key personnel; it will also identify key personnel who the Board consider to be 'the next generation leaders' and, where specialist skills learning programmes and development modules are identified, these will be added to their personal development programmes.

Quality and manufacturing procedures

The Group operates stringent "Total Quality Management" ("TQM") procedures and measures its performance.

TR manufactures around 30% of its inventory, the balance being sourced from strategic manufacturing partners. Like key customers TR regularly visit manufacturing operations to ensure that high standard operating procedure guidelines which cover production, security, logistics and quality are being adhered to.

Financial

Currency

The business is exposed to currency movements relating to sales, purchases and cash borrowings particularly against the US Dollar and the Euro. Currently, as far as practicable, TR operationally hedges, will monitor exchange rates and buy & sell currencies in order to minimise its exposure. It is also reviewing instruments available through its banking partners to reduce the Group's open exposure to foreign exchange rates.

Working capital & stocks

As the business grows TR is required to carry additional stock to meet its transactional and OEM business which could lead to an increased exposure to obsolete stock. However, through TR's involvement at the R&D entry point through the production life of a product and customer underwrite forms, control of obsolete stock risk is kept to a minimum. The tight control over stock purchases has seen us report a reduction in Gross stock weeks.

Customer Failure and Debtor exposure

The business operates very tight controls on debtors and working capital. Monitoring systems in place assist in highlighting and managing debtor defaults and customers' trading; the impact of these controls is reflected in the reported Accounts which show less than 4% Group exposure in balances overdue.

External

Macro economics

Currently over 50% of revenue comes from the UK with the balance from Asia, Europe and the Americas.

The Group has benefited from the re-stocking cycle during 2010/11. Historically, whilst the distribution/manufacturing sectors bear the affect of destocking in tough and challenging economic periods, TR protects itself to some extent from this by differentiating itself through "added value" capabilities, such as, high levels of service, design & engineering support, customer partnerships and working practices.

The Global Sales team and the Group's purchasing strategy provides TR with the opportunity to secure a larger market share despite a possible repeated reduction in overall market size. For example as we indicated last year, should another economic downturn be experienced across the world and TR was to secure as a much as 1% of the global market it would see £500m sales, so growth aspirations continue to be legitimate.

Raw material price inflation

Industrial businesses have to contend with fluctuating material prices, energy and freight costs, as well as "cost down" pressures and stock obsolescence.

The Group is exposed to raw material price increases in relation to steel, plastics and fuel. TR is able to monitor costs effectively and has the ability to pass on cost increases to customers, although in the current markets there can be a "lag" as old stocks and contracts feed through and new supply prices take effect.

Competitor Pressures

TR benchmarks its operations and services against several leading logistics providers, both in and outside its sector to ensure it remains competitive in its service offering. As part of TR's business objectives it regularly addresses its logistics systems and focuses on reducing resource duplication where possible.

TR's Key Performance Objectives

  • Increase Revenue, organically and acquisitively
  • Increase profitability
  • Ongoing margin enhancement
  • Maintain positive cash generation
  • Increase Return on Capital Employed
  • Broadening the skills of management and staff

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